You added 20% for overhead on your last bid because a forum post said 20%. Your neighbor GC uses 35%. Your insurance renewal came in 8% higher than last year - before the umbrella policy. All three of those numbers are guesses, and only one of them is keeping up with reality.
Here's the honest answer: most contractors run overhead between 25% and 45% of revenue. The range is that wide because overhead isn't a rule - it's your company's cost structure on paper. Crew size, trade, truck count, and whether you pay yourself for admin time all move the number.
This guide gives you the benchmark ranges (with sources), translates percentages into real dollars by company size, and shows how your overhead rate decides the hourly rate you quote. No theory - just the math you'd work through on a tailgate.
Let's dig in.
What Overhead Actually Is (And What It Isn't)
Overhead comes in two flavors.
Direct overhead is tied to specific job sites - the site trailer, the foreman's truck, the dumpster on one project. Indirect overhead runs the company - office rent, insurance, accounting, software, and your own salary when you're doing bids instead of building.
Profit isn't overhead. That distinction matters more than most contractors think, and we'll come back to it.
Here's what belongs in the bucket:
- Insurance - general liability, workers' comp, commercial auto, umbrella
- Vehicles - payments, fuel, maintenance, registration
- Shop and storage - rent, utilities, yard space
- Admin - bookkeeper, permits clerk, software subscriptions
- Marketing - ads, website, lead services
- Owner salary - the hours you spend estimating, billing, and chasing payments
Here's what most people don't know: insurance is the fastest-growing line in that bucket. Commercial general liability renewals have risen for 26-plus consecutive quarters, running about +4-5% a year (CIAB market surveys). Commercial auto jumped 7.3% in a single quarter in late 2023, and Marsh reported casualty rates up 8% in Q3 2025 - with umbrella coverage up 16%. If you priced your overhead in 2022 and haven't touched it, the number is stale.
Overhead Benchmarks by Trade and Company Size
First, a confession about the data: no government agency publishes official overhead rates. The Bureau of Labor Statistics tracks how fast contractor markups change - not what the average rate is. The ranges below are aggregated from industry benchmarks and published trade data, so treat them as planning ranges, not gospel.
| Trade | Typical overhead | What drives it |
|---|---|---|
| Roofing | 30-45% | High workers' comp rates, equipment |
| HVAC | 35-50% | Vehicles, inventory, licensing |
| Plumbing | 30-45% | Vehicles, equipment, licensing |
| Electrical | 28-42% | Licensing, continuing education |
| Painting | 25-38% | Lower equipment costs |
| General contractor | 35-50% | Office staff, project management |
Company size moves the number too:
| Annual revenue | Typical overhead |
|---|---|
| Under $250K | 25-35% |
| $250K - $750K | 30-40% |
| $750K - $2M | 35-45% |
| $2M - $10M | 40-50% |
Smaller shops sit lower because there's less infrastructure to carry. As revenue grows, so do the office staff, systems, and management layers the business needs.
Two hard anchors worth knowing alongside those ranges:
- The floor is about 20%. Remodeling Magazine's Cost vs Value 2025 data bakes roughly 10% on materials and 10% on labor into its project prices - and flags that as a minimum, since real contractor markup runs higher to cover benefits, insurance, and vehicles.
- Commercial GC work runs leaner. CFMA benchmarking data, as cited in industry write-ups, puts overhead for commercial general contractors around 15-20% of revenue - well below most residential trade numbers, because volume spreads the fixed costs thinner.
But here's the kicker: percentages hide the dollar shock. Let's fix that.
What Overhead Means in Real Dollars
Take the same ranges and convert them to what they actually cost per year:
| Annual revenue | Overhead rate | Yearly overhead | Every working day |
|---|---|---|---|
| $250K | 30% | $75,000 | $206 |
| $500K | 35% | $175,000 | $479 |
| $1M | 40% | $400,000 | $1,096 |
| $2M | 45% | $900,000 | $2,466 |
That last column is overhead divided by 365 - because overhead doesn't take weekends off.
The result? A half-million-dollar company burns about $479 every morning whether you've got three jobs running or zero. Rain day, truck in the shop, crew out sick - the meter never stops.
Translation to an hourly rate: a 3-tech crew billing 1,600 hours each logs 4,800 billable hours. $175,000 of overhead spread across those hours is $36.46 per billable hour before anyone earns a dime of profit.
And that's the bridge most homeowners - and honestly, plenty of contractors - never see. BLS wage data puts the median electrician at $29.61 an hour (May 2023, annual median $61,590). So why do electrical customers pay $75-200 an hour? The gap between wage and rate is overhead: insurance, trucks, licensing, admin, and the 20+ hours a week nobody billed for. Same story for plumbers at 2.5-6x their tech's wage. It's not profiteering - it's a cost structure. Our guide on how to calculate construction labor cost walks the full burdened-rate math if you want the worker-level version.
Your Markup Has to Carry More Than It Used To
Overhead isn't just a level - it's a moving target. BLS runs an official index tracking contractor overhead-and-profit markups (December 2004 = 100), and the trend tells the story:
- 2011 low: 85.2 - contractors cutting rates to survive the recession
- January 2018: 105.4
- November 2022: 164.7 - an all-time high
That's a 56% increase in five years (BLS, Beyond the Numbers, November 2023). The pace was just as striking: before the pandemic, roughly 10% of surveyed bids included a markup change in a typical month. From April 2020 through June 2022, that average more than doubled to over 17% - and in May 2021 alone, 27% of reported bids carried a markup adjustment.
Turns out, when steel and lumber doubled in 2021 and insurance renewed higher every year, keeping your markup flat was the same as cutting your price. A markup that comfortably covered your company in 2019 is quietly underwater today - on the exact same job.
The Math Mistake That Comes With Overhead Numbers
One more trap, and it's the most expensive one: adding overhead to a bid with markup math when the number is a margin number.
Overhead is usually expressed as a percentage of revenue. Markup is a percentage of cost. Mix them up and your bid falls short by design.
Say your books show 30% overhead and you want 10% profit. That's a 40% margin target - so the markup you must charge is 40 ÷ (100 - 40) = 66.7%. On a $10,000 direct cost, that's a $16,667 bid. Overhead eats $5,000, profit lands at $1,667, and the math checks.
But here's what happens all over contractor forums - and even in published how-to guides: someone takes "40%" and treats it as markup. Same $10,000 cost becomes a $14,000 bid. Then overhead takes its 30% of the $14,000 revenue: $4,200. Add the $10,000 of direct costs and the job finishes $200 in the hole. The bid was supposed to earn $1,000 of profit. Instead, that's a week of work done for free.
That's not a rounding error. The full conversion table - and what the mix-up costs across 50 jobs a year - is in our markup vs margin guide. The markup calculator runs the conversion both directions in about ten seconds.
How to Find Your Real Number in 5 Minutes
Stop borrowing percentages from forums. Your books already know the answer:
- Pull last year's overhead total. Everything in the bucket above that isn't tied to a specific job. One call to your bookkeeper gets the number.
- Divide by total revenue. $180,000 overhead on $600,000 revenue = 30%. That's your rate - not a benchmark's, yours.
- Compare it to the tables above. Inside the range? You're priced normally. Above it? Check insurance renewals and vehicle costs first - they've been the fastest risers. Below it? Make sure you counted your own admin salary before celebrating.
- Rebuild your markup. Overhead % + profit target = margin target. Convert with ÷(1 - margin), then reprice three finished jobs. If your winners stay winnable and your losers were losers anyway, the number is real.
If your rate comes back suspiciously low, here's the usual culprit: you didn't count your own time. Fifteen hours a week on estimating and billing is 780 hours a year. At $40 an hour, that's $31,200 of invisible overhead - over 15% of a $200K revenue shop, missing from the math.
Bottom line: there's no official standard overhead number, and anyone who quotes one without sources is guessing. But there is a number that's 5 minutes away - your overhead divided by your revenue - and it beats every benchmark on the internet. Bid from your books, not a forum.
Frequently Asked Questions
What's a good overhead percentage for a small contractor?
Most small contractors land between 25% and 40% of revenue. Solo operators under $250K often run 25-35%, while crews with shop space and office staff climb toward 35-45%. The right target is your actual number from the books - the ranges just tell you whether yours is normal.
Is owner salary overhead or profit?
The part of your salary paying for admin work - estimating, billing, scheduling - is overhead. The part rewarding business risk is profit. Contractors who skip their own admin time in the math see artificially low overhead, then underprice jobs without knowing why. Pay yourself for admin hours and count it.
What's the difference between direct and indirect overhead?
Direct overhead attaches to specific jobs - site trailers, a foreman's truck, one project's dumpster. Indirect overhead runs the company: office rent, insurance, accounting, software. Job costs capture the direct kind; your overhead rate needs the indirect kind, and mixing the two double-counts or double-misses.
Why do trades have different overhead percentages?
Cost structure. Roofers carry high workers' comp and heavy equipment. HVAC and plumbing contractors carry vehicles and inventory. Electricians lean more on licensing and continuing education. The trade with the biggest fixed costs shows the highest overhead rate - which is why copying another trade's number never works.
Do I add overhead to a bid as markup or margin?
Careful here - this is where bids go wrong. Overhead benchmarks are expressed as a share of revenue, which is margin math. But markup is a share of cost. A 35% overhead rate plus a 10% profit target is a 45% margin target, which takes an 81.8% markup to hit - not 45%. Convert with target ÷ (1 - target) before the number touches a bid sheet; the markup vs margin guide has the full table.
Is 50% overhead too high?
Depends on the revenue it covers. A small shop at $300K with 50% overhead means $150K of fixed costs - worth auditing. But high overhead on strong revenue isn't automatically a problem; check what's driving it. If insurance renewals and vehicles account for the jump, those are market rates, not waste. If it's marketing spend, verify the jobs it wins.
How often should I recalculate overhead?
At least annually, and ideally quarterly. Insurance renewals, vehicle purchases, and staff changes all move the number - and commercial rates have climbed for 26-plus consecutive quarters (CIAB). A rate set two years ago is almost certainly below your real costs today.
Running service calls alongside your bids? Your overhead shows up in the trip fee too. Our plumbing estimate template handles the math on both.
Disclaimer: Benchmark ranges are aggregated from industry publications and are illustrative, not quotes for your business. Sources: Remodeling Magazine Cost vs Value 2025 (markup floor); U.S. Bureau of Labor Statistics, "Nonresidential building construction overhead and profit markups," Beyond the Numbers, November 2023; CIAB commercial insurance market surveys; Marsh Global Insurance Market Index Q3 2025; BLS Occupational Employment and Wage Statistics (May 2023). This article is for educational purposes and is not financial or tax advice - confirm your rates with your accountant.